Asian stocks drop after US chip sell-off, oil falls
Published Thu, Jul 2, 2026 · 09:31 AM
ASIAN stocks fell on Thursday (Jul 2) after a sell-off in US chipmakers reignited concerns that the artificial intelligence-driven rally has outpaced fundamentals.
South Korean stocks fell over 5 per cent, pulling the broader MSCI Asia Pacific Index down 0.9 per cent. US equity-index futures retreated 0.3 per cent.
The moves came after Wall Street benchmarks dropped on Wednesday and a gauge of semiconductor stocks sank 6.3 per cent.
Some relief for markets came as crude oil extended its decline. Brent fell 0.8 per cent to trade at US$71 a barrel, the lowest level since Feb 28, when the US and Israel attacked Iran.
Much of the market focus remains on Federal Reserve chairman Kevin Warsh, who said price risks have come down in recent weeks, while repeating his determination to bring inflation back to the US central bank’s 2 per cent target.
Two-year Treasury yields steadied during early Asian trading, as gold held its gains from the previous session.
Speaking at the European Central Bank’s annual forum in Sintra, Portugal, Warsh said inflation expectations had moderated over the past month. He also reiterated the Fed’s commitment to restoring price stability, reinforcing expectations that policymakers are in no rush to raise interest rates.
While the sell-off in semiconductor stocks continued to weigh on sentiment in the equities market, investors took some comfort from comments by Warsh and other central bankers suggesting inflation risks have become more balanced.
Attention now shifts to the US jobs report on Thursday for fresh signals on the policy outlook after Warsh’s remarks dampened expectations of a July rate increase.
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“At a minimum, his comments provided no fuel for speculation on a near-term July rate hike, and in our view suggest the new Fed chair – while keeping all options open meeting by meeting – does not currently see cause for an immediate hike,” said Krishna Guha at Evercore.
Meanwhile, US manufacturing expanded for a sixth straight month in June as the war-driven surge in input costs eased, adding to signs the economy remains resilient. Printing, electrical equipment and textiles led gains, while paper products, furniture and wood products contracted.
“Overall, the report points to continued resilience in the manufacturing sector and supports our view that the US economy is re-accelerating, with growth remaining on track to reach approximately 2.4 per cent this year,” said Eugenio Aleman, chief economist at Raymond James.
Attention now turns to Thursday’s US employment report for fresh clues on the economy.
Warsh has made inflation the Fed’s primary focus, meaning June payrolls are “unlikely to shift interest rate expectations on their own”, said Julien Lafargue, chief market strategist at Barclays Private Bank and Wealth Management.
Hiring tied to the Fifa World Cup is also expected to distort the data.
Elsewhere, US negotiators Steve Witkoff and Jared Kushner held positive discussions in Qatar and progress is being made on technical talks with Iran, according to a senior administration official, as the countries seek to turn an interim peace deal into a permanent end to the war.
Working groups have been formed by Teheran to discuss the implementation of the current agreement and negotiate a final peace deal, though no talks have taken place yet, the state-run Islamic Republic News Agency reported, citing Deputy Foreign Minister Kazem Gharibabadi.
“We are on the optimistic front on geopolitics,” said Mohit Kumar of Jefferies.
“It is not that we feel that we will have a comprehensive deal. It’s likely to be more of a fudge. But as long as the strait remains open and oil keeps flowing, market is likely to get de-sensitised around geopolitics.”
Among the main moves in markets, the S&P 500 futures fell 0.2 per cent as of 9.05 am Tokyo time. Hang Seng futures were unchanged and Japan’s Topix was little changed.
Australia’s S&P/ASX 200 fell 0.7 per cent and Euro Stoxx 50 futures fell 0.6 per cent. BLOOMBERG
